Sigma to give investors a spoonful of sugar

Investors will this week have more corporate news to digest following last week’s tumultuous market performance that was capped by the US President’s $US447 billion ($420 billion) job stimulus announcement.

At least three companies are scheduled to post results with drug distributor
Sigma Pharmaceutical
kicking things off on Wednesday with its half-year profit report.

Investors anticipate a stronger bottom line and are likely to be sensitive to disappointing news given the stock has outperformed the market and is trading above most brokers’ price targets.

Consensus estimates forecast a 16.3 per cent uplift in underlying net profit to $21.9 million for the six months to the end of July despite a close to 20 per cent drop in revenue to $1.3 billion as Sigma undergoes a restructure to turn around its fortunes.

The expected increase in net income is largely due to the shortening in credit terms Sigma used to give to pharmacies as well as streamlining of the business. Shareholders will be keen to hear from management whether its turnaround strategy is still on track.

Sigma sold its pharmaceutical division to Aspen Pharmacare last year for $900 million and paid a special dividend that helped bring its total return over the past 12 months to nearly 60 per cent when the S&P/ASX 200 Index is nursing a total loss of more than 4 per cent.

Eastern Star Gas
is expected to release its full-year result on Wednesday, but shareholders are unlikely to pay much attention to the company’s financial performance as it has fallen into the hands of
Santos
following the latter’s $924 million bid.

Department store
Myer
is expected to release its full-year result on Thursday and investors will see how much the challenging retail environment has hurt its bottom line. Sluggish consumer confidence and intense competition is behind the expected 6 per cent decline in revenue to $3.09 billion for the year ended July 31 and a 5 per cent drop in earnings before interest and tax to $257.8 million. Management has been vocal in calling for the government to impose the GST on all offshore internet sales and is likely to speak about how the uneven playing field is hurting its sales.

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It is unclear if Myer will give much more in terms of guidance given that the economic uncertainties will make forecasting difficult. Consensus estimates forecast next to no growth for Myer in the current financial year. Brokers polled on Bloomberg were divided on their recommendations for the stock despite Myer trading on a relatively attractive one-year forward price-earnings multiple of about 8 times.

Qube Logistics and Asciano will hold their investor day this week. Qube’s management should have little trouble drumming up interest when it holds the event on Wednesday following the stock’s inclusion in the S&P/ASX 200 Index, while
Asciano
will court investors on Thursday. Asciano has ruled out a demerger for now but has not closed the door on the idea.